Monday, February 22, 2010


Dance the [crackpot] Night Away

Five Senate Republicans who should know fuckin' better have signed onto Harry Reid's "jobs" bill ...

Too bad Reid and the Dems and the turn-coat GOPers didn't pay heed to something I wrote back in 2003 -- the specific details are dated; the overall theme is seven-years-later true:

In the months leading up to the 1936 elections, Franklin Roosevelt and his Democratic allies in Congrss enacted new spending programs to create an artificial inflationary spurt in the economy. FDR was re-elected in a landslide; however, his left-wing economic plan pushed the U.S. into a painful recession in 1937-38. In his masterwork, The Roosevelt Myth, John T. Flynn dubs the machinations of Roosevelt and his cronies as "the dance of the crackpots."

We're now witnessing a new dance of the crackpots. The ten Democrats currently running for president have been offering increasingly silly and outdated proposals to scrap President Bush's tax-cuts and enact policies to "stimulate demand." These ideas are basically warmed-over Keynesian claptrap that FDR's crackpots offered up sixty-five years ago. Unlike the present-day Keynesians in the Democratic Party, Roosevelt's crackpots had the excuse that most of their schemes had yet to be proven false.

Contrary to the crackpot theories of the neo-Keynesians, slow economic growth does not signify "too much supply and not enough demand." It signifies a mismatch between what companies are producing and what customers want. I'm sure there was excess supply in the candle industry when electric lighting became readily available. The answer to excess capacity in candle manufacturing was not for the government to stimulate demand for candles. It was to allow industry to make needed investments in the industries that were replacing wax and wick.

In times of recession, the government should focus its fiscal policy on removing barriers to investment. That's precisely what President Bush said when he offered a bold measure to reduce taxation. Bush's plan to eliminate the double-taxation of corporate dividends and his slashing of marginal tax rates was a good start. (GDP has been growing faster than expected.) However, accelerating depreciation schedules and slashing marginal tax rates on capital gains would help even more.


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